Are You Taking the Wrong Approach to Digital Transformation?

In our 2017 report on digital business, we asked respondents how their companies were driving digital transformation. The report groups companies into three different stages of digital maturity — early, developing, and maturing — and we found that each has a different approach to leading digital change. While the distinctions between how early and developing companies approach digital transformation are nuanced, the difference between these less advanced organizations and the companies that have advanced the farthest toward digital maturity is far more striking.

Early and developing companies push digital transformation through managerial directive or by technology provision. In contrast, maturing companies tend to pull digital transformation by cultivating the conditions that are ripe for transformation to occur. This culture-driven, bottom-up approach is one we are actively exploring in this year’s research. Our research to date suggests that the approach many companies are taking toward digital transformation may be misguided.

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Mandate From Management

Early-stage companies report that their primary method for driving digital adoption and engagement involves mandating digital initiatives from management. In this situation, organizational leadership decrees the nature of the next digital initiative, and employees are then expected to fall in line. A key problem with this approach is that top-down directives can often be a surprisingly ineffective tool for driving digital adoption.

The academic literature is replete with examples of employees finding various ways to avoid digital mandates when they want to. Responses range from employees simply dragging their feet to actively sabotaging digital initiatives so that they will be unsuccessful. They can also use digital tools in unanticipated ways, which may or may not align with the business objectives managers intend. It can be difficult to foster all of the necessary behaviors to derive the desired business value from digital technology.

Digital leadership requires different approaches than the entrenched command-and-control structures of the traditional company in the manufacturing age. It is similar to what Harry Truman said about General Dwight Eisenhower, his successor to the United States presidency:

“He’ll sit here, and he’ll say, ‘Do this! Do that!’ And nothing will happen. Poor Ike — it won’t be a bit like the Army. He’ll find it very frustrating.”

Likewise, with digital initiatives, when managers simply require that digital transformation will happen, it is unlikely to yield the outcomes one would normally expect in more traditional management environments.

While managers know that employees will not be driven by magical forces urging them to adopt new digital initiatives, they often don’t provide the type of time, support, and motivation to adopt that they know would be necessary in other settings. Instead, companies often spend considerable time, money, and energy implementing digital platforms, expecting that the value of these digital tools will become so apparent to employees that they will be drawn naturally to them to perform their work. Companies that simply expect employees to adopt generally emphasize the technological side of digital implementation — and often execute that implementation well — but then forget to accompany the new digital infrastructure with the organizational change management initiatives required.

Not only do employees need to be trained to use new digital tools, but they also need to be given time to figure out how to integrate these tools into their work. In research conducted with Lynn Wu of Wharton, we found that adoption of a new digital platform actually hindered employee performance for the first few months after adoption. It was only after about six months of use that organizations observed significant performance improvements.

Simply expecting employees to learn how to work with new digital tools while performing at pre-adoption levels puts employees and their organizations at a disadvantage for successful digital transformation. Such expectations are unrealistic, yet unfortunately quite common.

Driving Transformation Through Culture

Maturing companies, however, lead digital transformation in an entirely different way. Instead of explicitly pushing digital transformation, they focus on creating the type of environment where these shifts can occur. Nearly 80% of respondents from maturing companies note that their organization drives digital transformation by cultivating a strong digital business culture that strives for risk-taking, collaboration, agility, and continuous learning. Conversely, only 24% of early-stage companies and 54% of developing companies said they were actively trying to develop a digital business culture as a mechanism for digital transformation.

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In other words, companies that are already ahead when it comes to driving digital transformation are doubling down on these efforts to move themselves even further down this road. Companies that are already the most collaborative, agile, and risk-tolerant are the ones that are also most likely to strive to become more so.

Several reasons may explain why maturing companies are driving additional efforts to develop a digital-friendly culture. First, once these companies experience the benefits of these cultural changes, they often want to keep moving in that direction. Second, they recognize that the natural tendency of organizations is often to move toward a stable state that becomes resistant to change, so they must constantly work to maintain the necessary flexibility for ongoing transformation. Third, as they grow and continue to hire new employees, they recognize that the need to maintain that digital-friendly culture becomes even more important, since these new employees don’t necessarily know how things are done at their company.

Regardless of the reason, the actions are the same. Only by continually working on these hallmarks of effective digital culture can digitally maturing companies keep driving ongoing digital transformation that is necessary to keep pace with an ever-changing digital world.

How Is Your Company Driving Digital Transformation?

As your company considers (or reconsiders) its own digital transformation initiatives, you should ask yourself whether you are approaching it the right way. Are you pushing digital transformation on your organization, either through mandating adoption or forcefully implementing technology? Or, are you pulling transformation by cultivating the type of conditions that will elicit the types of change you desire? These differences may determine the ultimate success or failure of your digital transformation efforts.

Do you have perspectives to share on how your organization is leading digital transformation efforts? Take our survey and shape our 2018 research.